Even as mortgage rates begin to rise, the difference between conforming and jumbo loan rates is shrinking, and that is good news for buyers of higher-priced homes. Conforming loans are largely financed by Fannie Mae and Freddie Mac, and are valued at up to $417,000 – although they can be as high as $625,000 in some of the nation’s pricier markets. Mortgage loans in Denver certainly fall in this category.
Jumbo Loans are anything above that and are funded by banks or private investors. Rates used to be far higher for jumbo loans, but that is changing fast. As reported by the Mortgage Bankers Association, The spread between a jumbo and a conforming mortgage rate was as wide as 0.875 percent last summer. It has now dropped to between 0 and 0.25 percent as of Monday.
The jumbo market has heated up, as tight lending guidelines have drastically reduced consumer late payments, strategic defaults, and foreclosures, this gives investors confidence to buy jumbos again, which means lower rates for consumer borrowers.
The rebirth of jumbo securitization is being driven not just by investor confidence, but by growth in jumbo origination, which increased after the conforming loan limit was lowered. Origination of non-agency jumbo mortgages jumped by over 19 percent in 2012 from 2011, according to Inside Mortgage Finance.
During the housing boom of the last decade Americans withdrew over $1 trillion in home equity. They did it through cash-out refinances, home equity loans, and home equity lines of credit. The latter allowed them to use their homes like an ATM. They spent the money on cars, televisions, vacations and fancy home upgrades. It was seemingly endless equity, until suddenly that equity was gone.
But the Home Equity Line of Credit (HELOC) is back and millions of homeowners are tapping into their equity to put it back to work. Nationally there has been a 31 percent increase in HELOC’s year-over-year.
With home prices up 8 percent year-over-year in December, according to the latest reading from CoreLogic, homeowners are regaining home equity at a fast clip-1.4 million borrowers rose above water on their home mortgages through the end of September. That number likely increased as price appreciation accelerated toward the end of the year.
Unlike the equity grab during the housing boom, this is real equity that borrowers are tapping into. During the housing boom, banks were relaxed in their valuation processes, often times only requiring a statistical valuation or at the most a drive-by-appraisal. But not this time. After getting burned by their second lien positions, banks are making sure that the equity is really there and are using very strict underwriting guidelines. The fact that under these new strict guidelines and appraisal scrutiny more and more HELOCs are being approved is another sign that the housing market has some real strength.
The S&P/Case-Shiller 20-city composite posted that home prices were 5.5% higher than during the same period in the prior year, for the strongest year-over-year growth since August 2006, with increases in 19 of 20 cities.
Housing is clearly recovering, with positive trends for new- and existing-home sales. However, prices remain 30% below a bubble peak in 2006, according to Case-Shiller data. This, coupled with favorable rates from mortgage lenders in Nebraska means that there is still an excellent opportunity to select your next home while home prices still have room to move upward.
The National Association of Realtors said that December sales of previously-owned homes were up 12.8% from a year ago. That brought full-year sales to 4.65 million, up 9% from 2011 and the best year for home sales since 2007, when there were 5 million homes sold just before the start of the recession.
The improved demand for homes in December led to the inventory of homes for sale to fall to 1.82 million homes on the market, the lowest supply since January 2001. The tighter supply, and the drop in distressed sales, have helped to lift home prices so that the median sales price for the year rose to $176,600, up 6.3% from 2011. That’s the biggest gain in prices in since the bubble year of 2005.
Realtors are predicting strong sales should continue into 2013 and beyond. It has a forecast for 5.1 million existing home sales this year, and 5.4 million next year.
The Commerce Department said than New U.S. single-family home sales hit a seasonally adjusted 369,000-unit annual rate.
The median price for a new home rose to $248,900 in December from $245,600 in November, according to figures that are not adjusted for seasonal swings. Rising prices are seen as a sign of improving health in the housing market.
Economists think home building added to economic growth last year for the first time since 2005. Friday’s report showed 367,000 new homes were sold last year, the most since 2009.
The rebound in U.S. home building accelerated in December, capping the best year for the industry since 2008 and adding to signs that residential real estate is contributing to economic growth.
According to Commerce Department data, New Home Starts climbed 12.1 percent last month to a 954,000 annual rate, which exceeded all forecasts of economists. Spurred by record-low mortgage rates, home construction will probably keep making headway in 2013 as it recovers from the worst slump since the Great Depression.
Housing starts remain short of the 2.07 million in 2005 at the peak of the boom, which was three-decade high. They averaged 1.74 million a year from 2000 through 2004. All four regions of the country showed a gain in starts last month, led by a 24.7 percent surge in the Midwest. Construction of single-family houses climbed 8.1 percent in December from the prior month, to the highest level since June 2008. Work on multifamily homes jumped 20.3 percent.